Gold Held Down By Central Bank Intervention?

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Interesting segment on CNBC today with Steve Liesman pointing out that there is a new high in economic optimism and asking the question; “Good time to invest?” They then showed a chart of America’s favorite investments. 21% of Americans say gold is their favorite investment, which he said was down from latest report by a percent. If American actually invested 21% of their assets in gold though, it would be probably 10,000 an ounce right now, so I think this data is skewed to the CNBC audience that is biased towards gold. Found that interesting though.

There’s one other thing I want to address and it is market intervention by central banks like the SNB (Swiss). Look at their top holdings being mostly tech stocks and is it any wonder, when you can print money out of thin air (QE) and buy stocks that these stocks have done so well? Sure, some good business models. Not knocking that. But the tech bubble crashed for a reason. It was irrational exuberance. Today we see consumers as confident as ever about the economy but it is the central banks that are pushing stocks to these lofty levels. When the QE stops, there is only one way for the market to go. But will there be a mad rush to the exit? What would cause such? Being that it is October of a year ending in “7,” I have to lean short the market.

It won’t be till next year I think when we get the real deflationary crash. Look at Exter’s Inverse Pyramid to see who eventually will benefit from this move lower. The numbers are all higher now, but you get the picture. We have had nothing but credit pushing everything up into la la land since the times of President Reagan. Central banks though have changed the game with their balance sheets taking on more risk and implementing unprecedented QE.

How things unfold will be like this for gold, markets and treasuries;

1400+ right now. Then we will top out and fall overall with the markets similar to 2009 crash. Treasuries and the dollar will shoot higher. Then, after that episode, gold will take off to new highs and much higher as what I call “super inflation” enters the pictures. Bonds will crash (junk bonds will crash earlier) and stocks can actually move higher but not keep pace with inflation.

There is no way we can trade leveraged ETFs for the long term now by holding onto them. That’s why we have to trade in and out and take our profit. The deterioration alone will kill your returns.

Money, however, will eventually be chasing the assets that are no one else’s liability. Gold and silver. That’s why you see that asset outside the pyramid (and why anyone who has it at the bottom of the pyramid has it wrong. You know who told me that? John Exter’s son-in-law Barry Downs who was actually at the meeting in 1980 of Paul Volcker and John Exter when Volcker asked Exter what to do (answer was loosen monetary policy). The Fed today is not the Fed of then. This time it will be different. And most will not be prepared.